Tribunal approves merger between Shell and Tepco

Feb 11, 2002 01:00 AM

The Competition Tribunal took just two hours of deliberation before unconditionally waving through a merger between oil giant Shell and black economic empowerment oil firm Tepco. This was a test case for the competition authorities involving empowerment in the oil industry. The ruling sent a clear signal that the tribunal believes empowerment can be achieved through the merger of a small black player with a larger entity, if the former wins a meaningful stake in the new enterprise.
The tribunal's decision followed a hearing at which recommendations by the Competition Commission that certain conditions should be attached to the deal were brushed aside by government. The commission had recommended that the Tepco brand should be retained and that Tepco should survive "in the market, as an entity jointly controlled by Thebe and Shell South Africa".

A minerals and energy department official, Kabelo Mothobi, told the hearing the commission's view "flies in the face of international experience" where similar mergers had not been subject to such strict conditions. The commission's head of mergers, Nkonzo Hlatshwayo, had questioned whether the merger with Shell would have enabled Tepco "to become competitive". He also said the commission had not been entirely convinced that the merger met the aims of South Africa's policy on black economic empowerment in the oil industry. He expressed concern that the merger would mean that Tepco would vanish.
Mothobi responded that it was government's view that Shell should take an appropriate commercial decision on whether to retain the Tepco brand and that it should not have its hands tied by the competition authorities. He argued that it would be a superficial view of empowerment to "count heads in the market".

Tribunal member Norman Manoim suggested that the conditions proposed by the commission would have put Thebe at a disadvantage to any equivalent white-owned company, by making Thebe less attractive to a potential purchaser. When Hlatshwayo was forced to admit that the commission's proposed conditions could have caused "some harm", tribunal head David Lewis said that this was "a fatal acknowledgement".
Shell's finance director Graham Corbin and Thebe-Tepco chairman Vusi Khanyile welcomed the decision. Competition Commissioner Menzi Simelane expressed concern that there seemed to be few alternatives for funding available to Tepco.

Source: Business Day
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